Australia's economy beats forecasts, but still just below par

A rise in mining exports was one of the biggest contributors to economic growth.

Australia's economic growth was stronger than expected in December, with GDP rising 0.8 per cent.

The December quarter result was a reasonable acceleration from the September quarter's 0.6 per cent growth rate, and takes the annual economic growth rate for 2013 to 2.8 per cent according to the Australian Bureau of Statistics National Accounts.

Economist forecasts centred on a rise of 0.7 per cent for the quarter and 2.5 per cent growth for the year, in a survey of 28 analysts by Bloomberg.

The ABS says gross domestic product (GDP) in the December quarter was driven by a 0.6 percentage point contribution from net exports and a 0.5 percentage point contribution from consumer spending.

The national statisticians say private business investment subtracted 0.5 percentage points from GDP.

JP Morgan's chief economist Stephen Walters says, while the overall result is a little better than expected, the domestic economy still looks weak.

"Of the 0.8 (per cent growth) over the quarter, 0.6 of that came from net exports, which is mainly a boost on the export side," he told Reuters.

"Obviously the rest of the economy is only adding 0.2 (per cent), so not particularly impressive. Domestically things are still transitioning, and we are getting a big boost to exports, but not to much else."

However, AMP Capital Investors chief economist Shane Oliver says the numbers demonstrate that the transition away from mining investment led growth to other sectors is happening about as smoothly as can be expected.

"There's a slump occurring in investment, there's no doubt about that as indicated in figures last week, but that's being offset by consumer spending, housing activity and trade," he told Reuters.

"I don't think it means anything for rates - the Reserve Bank would probably be pleased with these numbers, it confirms that the economy is not collapsing, but they would still regard them as sub-par just a bit below trend, which is what they're expecting."

Better start to 2014

TD Securities head of Asia-Pacific research Annette Beacher is even more upbeat, pointing to improved data in the new year.

"Data available for March quarter so far (retail sales, building approvals, job vacancies) hint that further upward momentum is assured and the next move is up for the cash rate," she confidently concluded in a note on today's data.

The Federal Government is hoping that Ms Beacher is correct, with the Treasurer Joe Hockey saying "we need to do better".

"You need trend growth or better - of 3-3.25 per cent - to start to get unemployment down and that is a core focus of what we're trying to achieve," he added.

Over 2013 as a whole, the data show that mining (0.6 percentage points) and financial and insurance services (0.5 percentage points) contributed most to the economy, while manufacturing, utilities, wholesale trade and accommodation and food services all shrank slightly (each subtracting 0.1 percentage points from annual growth).

The Australian dollar rose steeply just ahead of the data release and has held onto those gains, fetching 89.9 US cents at 11:32am (AEDT).